Everbright Bank Seeks $6 Billion in Hong Kong Share Sale

China Everbright Bank Co. is seeking about $6 billion in what could become Hong Kong’s biggest share sale this year, as it joins bigger rivals in raising money to cope with stricter capital rules and expand lending.

Everbright Bank began today to gauge investor demand for the offering of 10.5 billion shares, according to a term sheet obtained by Bloomberg News. The Beijing-based bank plans to set a final price on July 8 and start trading on July 15.

Chinese lenders in April were ordered to conduct stress tests on real estate loans, demand faster repayment on some borrowings and increase deposits set aside as reserves to the highest level in at least two decades. Everbright Bank, listed in Shanghai, is seeking funds as the benchmark Hang Seng Index (HSI) in Hong Kong fell 4.8 percent this month.

“We have yet to see any particularly strong selling points for Everbright Bank,” said Li Kwok-suen, a fund manager at Phillip Capital Management (HK) Ltd. “Everbright Bank may have to work hard to line up cornerstone investors and accept relatively low valuation to make its stock attractive.”

Everbright Bank rose 1.2 percent to 3.47 yuan at 11:29 am in Shanghai, giving the lender a market capitalization of 140 billion yuan ($22 billion). The price represents about 1.72 times book value, according to data compiled by Bloomberg.

Twelve banks listed in Hong Kong currently trade at 1.64 times price to book value, on average. Based on Everbright Bank’s Shanghai price, 10.5 billion shares are worth 36.4 billion yuan.

Hong Kong IPOs

IPOs in Hong Kong have raised $11 billion this year, compared with $5.9 billion in the same period in 2010, according to data compiled by Bloomberg. If successful, Everbright’s offering would top Shanghai Pharmaceuticals Holding Co.’s share sale last month, which raised $2.1 billion including the sale of over-allotment shares.

The offering by Everbright, China’s ninth-largest bank by market cap, may also be bigger than Prada SpA’s Hong Kong share sale, which could raise as much as $2.6 billion later this week.

Everbright Bank said profit for the year ending Dec. 31 should be at least 16.9 billion yuan, an increase of 32 percent from last year, according to a pre-listing document posted on the Hong Kong exchange today.

Proceeds of the stock sale will be used to “increase capital adequacy,” the terms show. The lender joins rivals including Industrial & Commercial Bank of China (601398) Ltd. in raising money to finance loan growth and cope with capital rules.

Pricing Range

For deals greater than $1 billion in size in Hong Kong this year, the $1.5 billion IPO of MGM China Holdings Ltd. was the only one priced at the top end of its expected range.

China International Capital Corp., Morgan Stanley (MS), UBS AG (UBSN), BNP Paribas (BNP) SA, BOC International Holdings Ltd., China Everbright Ltd. (165), HSBC Holdings Plc. (HSBA), JPMorgan Chase & Co. (JPM) Shenyin Wanguo HK Ltd. (218) and Daiwa Capital Markets HK Ltd. are managing the sale, according to the term sheet.

Everbright Bank will become the 10th Chinese lender to list in Hong Kong. The company in August raised $2.8 billion in an initial public offering in Shanghai, after cutting the size of the sale by 30 percent as the Shanghai Composite Index slumped.

A spokesman for Everbright Bank declined to comment.

To contact the reporter on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net

To contact the editor responsible for this story: Mohammed Hadi at mhadi1@bloomberg.net

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